New Partnership Seeks Value-Add Apartments in Metro Seattle

(left to right): Richard T. Leider and Peter S. Stone of Trinity Real Estate; James M. Norman and Robert R. Larsen of Norman Partners

Seattle—Trinity Real Estate and Norman Partners have formed a partnership to buy multifamily properties and other kinds of commercial real estate in the Puget Sound region. The new entity, Northstar Realty Fund, will focus mainly on multifamily properties that “would benefit from creative repositioning, redevelopment work and strategic re-marketing,” according to the partnership.

Northstar will seek value-added investments in mid-sized ($6 million to $15 million) properties through a structure that’s a little unusual. The fund is designed to provide individual investors with a significant measure of control over their invested capital, allowing each investor to participate only in investments they choose.

The Seattle market is a popular place among investors, and for good reason. According to real estate firm Kidder Mathews, the metro Seattle apartment vacancy rate was 5.3 percent as of the third quarter of 2011, a drop from 7.2 percent two years earlier, a trend that has put upward pressure on rents. The company anticipates a slow rise in vacancies by 2013 as some new product comes on line, but there might be a drop after that, especially if the labor market continues to recover.

In any case, institutional investors are on the hunt for apartments in metro Seattle. As of the end of September 2011, there were 65 sales regionally with a combined sales volume of about $954 million, notes Kidder Mathews. That compares with 66 sales representing $761 million for all of 2010.

Given the attractiveness of the region, the competition to acquire larger, well-located assets is fierce. Northstar says it will be targeting assets that are below the radar of many institutional funds, and thus often priced more attractively. The partnership—which includes principals Richard Leider and Pete Stone of Trinity Real Estate, and Jim Norman and Rob Larsen of Norman Partners—will then make capital improvements and pursue other value-added strategies for their investments.